Apple and IBM: Two PLM orchestrators sing a new tune

By Kevin O'Marah | July 18, 2014 | 0 Comments

Supply ChainBeyond Supply Chain

The Wall Street Journal this week reported on Apple and IBM, once mortal enemies, partnering to bring iPads and iPhones into wider corporate use. The marriage could spur growth for each as Apple’s consumer-friendly devices and apps melt into IBM’s legendary security-blanket pitch to corporate IT buyers. A win-win in the marketplace if it works, but one that some observers worry may be like mixing oil and water culturally. I disagree and think the DNA below the surface is a much closer match than it might seem.

More alike than you think

The WSJ feature included an incredibly chummy photo of Apple CEO Tim Cook and IBM CEO Ginni Rometty sauntering together down a garden path. This image reflects some essential shared history including not only Cook’s decade of work in IBM’s then world-class physical product supply chain, but also pioneering work integrating supply chain and product development. Apple, as we said in a report two years ago, is the ultimate new product development and launch (NPDL) orchestrator, but much of this expertise actually came from IBM.

Apple and IBM

About a decade ago, while studying product lifecycle management (PLM) for AMR Research, I was hosted by IBM in Hawthorne, New York for a deep dive into its systems and processes for integrating purchasing, manufacturing and logistics with R&D, engineering and product commercialisation. The takeaway for me was that IBM had nailed essentially all of the key metrics one could want from linking supply chain and product development – part re-use, engineering change cycle time, defects per million, etc. The business payback took the form of higher inventory turns, lower COGS, and faster time to market.

Equally impressive was the fact that IBM had built, mostly from scratch, the complete and ideal PLM application footprint including direct material sourcing, customer needs management, collaborative design, product portfolio management and a solid product data management foundation. For me, IBM was the poster child for excellence in PLM.

Turning the clock ahead a few years finds Tim Cook working for Steve Jobs to bring supply chain execution into better (ultimately brilliant) synchronisation with product development and marketing. Cook was not the only IBM veteran to make the move and before long Apple had gone from supply chain basket case to perennial #1 in Gartner’s annual ranking.

Coincidence? I think not.

Design for profitability

Old-school supply chain was notoriously linear with purchasing intent on buying stuff cheap, manufacturing focused on running plants full and logistics working to ship full truckloads. In slow moving, replenishment-orientated businesses this all makes sense, but once innovation takes centre stage such principles create lots of excess and obsolete inventory plus falling market share.

Lessons learned by Detroit’s big three auto makers in competition with a lean, customer-driven Toyota and ultra-flexible BMW have sunk in for most of us. Supply chain should facilitate innovation, not hinder it.

The big breakthrough conceptually is to shift from a linear model that assumes ideas are fed in from somewhere else to a self-renewing cycle where innovation happens everywhere, including not only sales & marketing or R&D and engineering, but also supply chain. Excellence ultimately looks less like a series of well-run departments handling plan-source-make-deliver duties and more like three overlapping and collaborative domains that accelerate innovation for customers.

We surveyed over 800 supply chain professionals recently asking them to self-assess their progress toward this ideal. One-third believes they are fully integrated, while another 37% self-classify as “semi-integrated”.

My opinion is that this assessment is overgenerous. Too many still struggle with cross-functional communication, especially with marketing or brand management people who often disregard supply chain’s contribution to product innovation. One head of marketing in medical devices recently betrayed shock that “supply chain doesn’t work for us”. Correct; we both work for the shareholders.

Design for profitability maturity model

Design for profitability maturity model infographic.

In the best-case scenario, this includes orchestrating the work of suppliers, partners and channels to create entirely new markets. This is exactly what Apple did with its iPhone product launch. It’s also pretty much what IBM did with the original personal computer.

Two great orchestrators separated in time are coming back together for another go.

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